Neoliberalism and the City1

David Harvey, City University of New York

It’s great to be here and, particularly, to celebrate the beginning of a journal with such anauspicious title. I have long been interested in questions of social justice; one of my firstbooks was Social Justice and the City. For me, it was a revelatory book to write and Ihope that it will one day be a revelatory book to read; but sometimes, as in this instance,you learn far more by writing than by reading. My book was about the city and I wouldlike to start with one of my favourite quotations about cities, which is by Robert Park, aSociologist writing in Chicago in the 1920s. Park put it this way about cities, he said:

The city is man’s most consistent and, on the whole, his most successful attempt to remake the world he lives in, more after his heart’s desire. The city is the world which man created; it is the world in which he is therefore condemned to live. Thus indirectly, without a clear sense of the nature of his task, in remaking the city, man has remade himself.

You'll have to forgive the gender bias in that quotation, it was written in the 1920s. Forme, the significance of this statement is something that needs to be reflected upon;because I can be accused of liking it but also because in some ways it parallels a famousstatement by Marx. In Capital, Marx talks about the process of human labour and hemakes the dialectical point that we cannot change the world around us without changingourselves and we cannot change ourselves without changing the world around us. And soMarx sees the whole of human history as being the working out of the dialectic oftransformations of who we are and what we are, along with the transformation of theworld around us, the environment and everything else. Park, of course was not a Marxist,I doubt if he ever read Marx, but Park is making the same argument. The implication ofPark’s argument is that the question “what of kind of cities do we want to live in” cannotbe divorced from the question of “what kind of people do we want to be,” “what kind ofhumanity we wish to create amongst ourselves,” and “how do we want to create it?” It isthat mutual constitution of the city, of who we are and what we are, that is somethingwhich I think it is very important to reflect upon. Particularly since we look backhistorically and ask, were we ever conscious of this task? Were we ever conscious thatwe were doing this? I think the answer is that as the cities changed, we changed withoutus really being very conscious of it. Occasionally someone would come along, a utopian usually, and say; “Hey, weshould make a different kind of city. And this different kind of city is going to be the kindof city where we are going to be wonderful people, instead of the all the evil nasty peoplewe see around us.” So there is a utopian tradition which tries to answer Park’s argument,by becoming conscious of the task and making proposals about city forms and city1 This is a transcript of a lecture given at the University of Windsor on September 25, 2006.

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ISSN: 1911-4788functions and city growth which is somehow connected to the idea of creating an idealhuman community, an ideal world in which we can live. Most utopian schemes havenever worked very well, for reasons that I will not go into here. But when we look backhistorically and geographically about the way in which New York was built, Toronto wasbuilt, Birmingham was built, Moscow was built, Shanghai was built, it isn't as if thoseplaces were built with the very distinct idea about what kind of people we wanted to be.But the result of that urbanization has been the creation of a certain kind of humansociety, and we have to pay attention to what kind of human society this is. There is a very old saying from the medieval periods, it says the “city air makesone free,” and it is here that the idea of the freedom of the city starts to be importanthistorically. A question I want to reflect upon today is “what kind of freedom do we havein the city?” Right now, if we say “city air makes us free” what kind of freedom is beingconstituted by the urban processes that are going on around us? These questions leadimmediately to the questions “what do we mean by freedom,” “who is in a position to tellus what this freedom is,” and “how do we designate what this freedom is?” Of course wehave a tremendous ethic for this idea called freedom. South of the border, a man called George Bush has actually done a lot of writing,many speeches, on this theme about liberty and freedom. I am so curious about this so Iactually took time off and re-read all of George Bush’s speeches and they’re veryinteresting. He says a number of different things. On the anniversary of 9/11, he said:

We are determined to stand for the values that gave our nation its birth, because a peaceful world of growing freedoms serves America’s long term interests, reflects enduring American ideals, and unites America’s allies. Humanity has the opportunity to further freedom's triumph over its age-old foes.

He goes on to say that the “United States welcomes its responsibility to lead with thisgreat nation.” These sentiments could be found before 9/11 in some of George Bush’sspeeches—they were not new. There is an interesting addendum. When Tony Blair cameto address Congress, in July 2003, he proposed a friendly amendment to George Bush’semphasis on American values. He said:

There is a myth that, though we love freedom, others don’t, that our attachment to freedom is a product of our culture, that freedom, democracy, human rights, rule of law, are American values or western values. Members of Congress, ours are not western values; they are the universal values of the human spirit.

Bush accepted this amendment. In his next speech which was delivered in Westminster inanswer to Blair’s speech, he said:

The advance of freedom is the calling of our time. It is the calling of our country from the 14 points [and here he is referring back to Woodrow Wilson], to the 4 freedoms [referring to Roosevelt], to the speech of Westminster [here talking of Ronald Reagan]. America has put its power

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ISSN: 1911-4788 in service of the principle that we believe that liberty is the design of nature, we believe that liberty is the direction of history. We believe that human fulfillment and excellence come with the responsible exercise of liberty. We believe that the freedom we prize is not for us alone, but the right and capacity for all mankind.

At his acceptance speech at the Republican National Convention in 2004, George Bushsaid: I believe America has been called to lead the cause of freedom in a new century. I believe that millions in the Middle East plead in silence for their liberty. If given the chance they will embrace the most honourable form of government ever devised by man. I believe all these things because freedom is not Americans' gift to the world, but the Almighty’s gift to every man and women in this world.

In his Inaugural Speech in January 2005, he said:

We can afford complete confidence in the eventual triumph of this world.

Not because history runs on the wheels of inevitability—it is human choices that move, advance—not because we consider ourselves a chosen nation—God moves and chooses as he wills. While history has an air of justice it also has visible direction set by liberty and the author of liberty.

There is an interesting set of transitions in these speeches. From the idea thatfreedom and liberty are American values, to the idea that they are universal values, to theidea that they are values imbedded in nature, to the idea that they are, of course, part ofthe intelligent design of the Almighty for the earth. What is interesting about this rhetoricis that it is persistent in the Bush Administration. We can take two approaches to it. Oneis to say this is just hot air, it is hypocritical nonsense. When we look at Guantanamo Bayor Abu Ghraib, when we look at all the things that are going on on the ground, we arehorrified that there is an incredible mismatch between this rhetoric about liberty andfreedom and the facts of what is occurring in the actual policies as they are unfolding.Even in the Patriot Act in the US, the authoritarianism that we are seeing at all levels ofgovernment—this rhetoric is completely false and hypocritical and this is the wrong wayto interpret it. I think it is wrong for a number of reasons. Bush sticks very much to hisclaims of liberty and freedom. The conservative columnist David Brooks of the NewYork Times made this comment and I think I partially agree with him, he says:

We should not assume that America is the money grabbing, resource

wasting, TV drenched, unreflective bimbo of the earth and all this high- toned language is just a cover for the quest for oil, for the desire for riches, dominion, or war.

I actually think America is all those things, but what Brooks is quite right about, is to saythat it is not just all of those things. The ideals of Bush are, in fact, deeply embedded inAmerican history and are very, very significant to the way in which people in the US

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ISSN: 1911-4788construe their positionality in the world. We need to find the power of this rhetoric, thesignificance of this rhetoric, and the tradition of this rhetoric. When for example, Bushreferred back to Woodrow Wilson he made a very, very powerful connection. WoodrowWilson (a Liberal) was concerned with liberty and freedom in the world. At the sametime, he was up against somewhat more grubby concerns. For instance, Woodrow Wilsonput it this way when he was President:

Since trade ignores natural boundaries and the manufacturer insists

on having the world as a market, the flag of his nation must follow him and the doors of the nation which are closed against him must be battered down. The concessions obtained by financiers must be safeguarded by ministers of state, i.e. the military, even if the sovereignty of an unwilling nation has been outraged in the process. Colonies must be obtained or planted, in order that any useful corner of the nation does not go overlooked or is left unused.

Roosevelt had similar global designs. Reagan of course, also similar. Now I want to makethis point because there is an erroneous view that Bush is an aberration in the Americantradition. He is not; he is firmly implanted in that tradition. Therefore we cannot entertainthe notion that simply voting Bush out of office and putting somebody like Clinton backin is going to solve the problem. Now this idea of freedom is very important, but we have to put some tangiblemeaning to it. The way that Bush set up the tangible meaning is by simply associatingagain and again in his speeches the idea that freedom is represented by the freedom of themarket and freedom of trade. What Bush meant by freedom is best signalled by what PaulBremer, head of the Coalition of Provisional Authority in Iraq, did before the handover ofgovernment. There was a complete reconstruction around the institutional arrangement ofthe Iraqi state. The privatization of everything was mandated. There should be no barrierto private ownership. There should be no barriers to foreign investors coming in anddoing as they please, no barriers on the properties of the country, no barriers to trade. Ineffect what Paul Bremer did, before he handed over authority, was to lay out a whole setof provisions in the Iraqi institutional arrangements which were consistent with aneoliberal state apparatus. A perfect fit with the WTO and also the theory of how aneoliberal state apparatus should look. There were something like 70-80 provisions,decrees that Bremer left with the Iraqis. When they handed over government to the Iraqis,it was a condition of handing it over that they could not change anything. So, the Iraqiswere invited to take this idea of freedom in a certain vein. The critic Matthew Arnoldmade a comment a long time ago, “Freedom is a great idea, it is a great horse to ride,provided you know where you’re riding it to.” What the Iraqis were invited to do was toride the horse of freedom right into the neoliberal corral. The Iraqi constitution that wasset up in 2003 was almost identical to the constitution that was arrived at 30 years ago, in1975 to be exact, in the wake of the coup in Chile which got rid of Salvador Allende andput Pinochet in charge. There was a two year hiatus in Chile because the question was,what kind of economic program would revive the economy? What they did in Chile wasbring in the Chicago Boys who said, “Privatize everything, open up to foreigninvestment, foreign trade, no barriers to repatriation of private property, have an export

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ISSN: 1911-4788led growth model.” Of course they didn’t have to discipline labour because all the labourleaders were dead, all trade unions were dismantled. All healthcare clinics where radicalopposition had fermented were dismantled. There was a completely neoliberal regimeimplemented in Chile in 1975, which was absolutely identical to the one the US imposedupon Iraq in 2003. So, again, there is a certain conception of freedom that is emphasized. I thinkwhat happened after the Chilean coup and what happened in Iraq brackets a wholehistorical theory in which strong processes of neoliberalism have transformed the world,transformed us to the point that all of us are neoliberals, whether we like or not. All of ushave absorbed the ethos of neoliberalization, and, as a result, we relate to each other invery different ways. We see this change most spectacularly in the ways that cities havebeen transformed during this period. For me, one of the most fascinating things has beento track neoliberalization back to New York City in 1975. This is exactly the same timethat the coup was occurring in Chile. New York City went bankrupt in 1975. The bankruptcy of New York City was asingular event that had dramatic global consequences. To begin with, New York City’sbudget was one of the largest public projects in the world. It was either the 14th or 15thlargest public project in the world. So bankrupting something of this kind would betantamount to bankrupting a country like Italy or France. The idea was so potentiallydamaging, that the West German Chancellor and the French President both appealed tothe Ford Administration and said “you can’t let this happen.” But it did happen and whathappened after it was absolutely crucial. Why and what happened? During the 1960s New York City had been losing jobsand companies had been moving out to the suburbs or out to the American South (not yetgoing to Mexico, Taiwan, or China, but they were moving out). As a result, industrialemployment was declining in New York City. Of course, this was going on in manyAmerican cities at the time. The result was that the centre of cities was occupied bydisaffected, unemployed, marginalized and very often racially marked populations. Theserose up in a variety of crises in the 1960s and it became known as the Urban Crisis of the1960s. Riots, particularly the ones that followed the assassination of Martin Luther Kingin 1968 created mayhem in many of the central cities. The federal government wasdetermined to do something about it. It decided it would try to help central cities recover;it set in place a recovery program. The recovery program largely rested on the expansionof the public sector. The public sector expanded because federal funds were flying intothe cities, very fast, and municipal governments could start to expand their workforcesand expand the services they offered. There was expansion of education, expansion ofhealthcare, expansion of garbage collection, and expansion of transit workers. The NewYork City municipal sector expanded very rapidly during the late 1960s and early 70s aspart of this stabilization program. This program also involved integration of racialminorities into the labour force through public employment. The whole programdepended on the city having adequate finances. The city did not have adequate financesand therefore started to borrow heavily in the late 1960s and early 1970s. The investmentbankers loved it because, New York City had a big budget therefore it was a secureinvestment. The investment bankers were very happy to fund all of this. In fact, they eventaught New York City slippery games, creative accounting and all those kind of things, so

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ISSN: 1911-4788they could get financed in more “sophisticated” kinds of ways. But, in 1973, thingsstarted to go bad. The city started to lose money, property taxes were in decline, andincomes were declining. And in 1973, the federal government found itself in a financialcrisis. I will always remember the day when President Nixon came on the radio for hisState of the Union Address and said, “The urban crisis is over.” I looked out the windowand said, “Wow, Baltimore looks the same to me.” I thought people would be dancing inthe streets. It was the same kind of grubby, messy, horrible kind of place, declining as italways had been. What Nixon meant by this was, “We are not going to give you anymore money.” They stopped giving money to New York City. Budgets were cut backwithout federal money coming in. So New York City started borrowing even more. In1975, the investment bankers said “No, we are no going to lend you any more.” It was adramatic moment when the city administration said, “What? What are we going to do?”The investment bankers said, “We don’t know.” So this is part of the story. The second part of the story is this, during the 1960s and 1970s, there had been aprogram of what I call “surplus capital.” There was too much capital around and no oneknew what to do with it. A lot of went to real estate speculation. There was a hugebuilding boom in many American cities and particularly New York City. This is the timethat produced the World Trade Center, which was an economic disaster because nobodyever wanted to locate in them and they could never be filled with regular tenants at all.There was a building boom and the most incredible overbuilding, particularly in theoffice sector. The city was also doing all kinds of things such as forgiving property taxes.It was a real game being played with developers around the property market. Theproperty market crashed in 1973. There were all these empty buildings around, notpaying taxes, and this was a part of the problem for New York City. So between theshortage of employment and the lack of property taxes, you had this crisis. But there isanother issue, why did the investment bankers suddenly decided not to lend? If you lookat an economy that is grossly in debt, is being fiscally managed in an appalling way,where all of the indicators suggest that you shouldn’t lend to them anymore, you arelooking at the contemporary United States. The aggregate data on New York City backthen is no worse than the aggregate data on the whole US economy right now. And theequivalent right now would be the Chinese Central Bank, Japanese Central Bank, and theSouth Korean Central Bank, suddenly deciding “We are not going to lend you any moneyanymore.” There would be no money in the United States to fight the war; no money tospend on this property boom, all this consumerism; no money to run the huge deficitwhich we are running. The question is why did the investment bankers in New York Citysuddenly decide not to lend? It seems to me, that this is the real story of the fiscal crisis ofNew York City. Clearly New York City was vulnerable, what was New York City doingthat the investment bankers didn’t like? What they were doing was playing nice to theunions, they were actually spreading the money around, and they were engaged in allkinds of philanthropic projects, actually being nice to minorities, black people, and all therest of it. The city was doing all kinds of things that stood in the way of the ambitions ofmen like David Rockefeller who wanted New York City to be an island for bourgeoisaffluence. At the same time that the monies were being pushed, there was a lot of anti-banker sentiment in the city and a lot of anti-corporate sentiment in the city. Remember, this was a time when students in Santa Barbara actually buried aChevy in the sand and burned down the Bank of America building. There was a lot of

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ISSN: 1911-4788radicalism, a lot of anti-corporate politics. Big businesses were getting nervous at thebeginning of the 1970s. They started to work together to try to recreate a viable corporatecapitalism that would have significant power. New York City was heading towardsbecoming a social democratic, almost socialist, kind of municipality. The big businesseswere terrified politically. So they launched a financial coup against the city. My argumentis that this financial coup against New York City was just as effective as Pinochet’smilitary coup in Chile. But, what now had to happen was New York City had to bedisciplined into a new kind of economic future. How are you going to do thatdemocratically? One of the things that happened immediately was that all authority overthe budget was taken away from the elected officials and given to the MunicipalAssistance Corporation (MAC), later called the Emergency Financial Control Board. TheMAC was run by the investment bankers, a couple of representatives from the state, and acouple of representatives from the city. What they did, in effect, was take all of thereceipts coming into the city, all the taxes, and they said, “We’ll take all this money andthe first thing we'll do is pay off all the bondholders; pay off all those holding the debt.Whatever is left goes into the city budget.” Well you can imagine what that meant forunemployment and cuts in services. It was a catastrophe. They even insisted that themunicipal unions put their all their pension funds into the debt. So, if the municipalunions created any kind of problem and New York City went bankrupt they would loseall their pensions. It was a very clever move for that time. It was here, I think, that an extremely important principle that became a globalprinciple was first enacted. If there is a conflict between the well being of financialinstitutions and the well being of the population, the government will choose the wellbeing of the financial institutions; to hell with the well being of the population. This ofcourse became the gospel of the International Monetary Fund (IMF) and their StructuralAdjustment Programs (SAPs) that began in the 1980s; one of the first ones was Mexico.The MAC disciplined the city, it attacked the workforce, and it attacked socialexpenditures of all kinds. But, the investment bankers had a problem; their problem wasthat they had all this property. So they couldn’t walk away from the city and say “the hellwith it,” they had to revive the city and discipline it at the same time. This situation wasreally hitting the services. Garbage was not being picked up; they had to come up with astrategy to revive the city so that the value of all those properties that had been negativein the 1970s would come back online. How did they do this? They did it in two ways. The first was an internationalploy. One of the things that happened in 1973, if you recall, was a huge rise in oil pricesas OPEC kicked in and there was an oil boycott. The price of oil shot up resulting inpetrodollars accumulating in the Gulf States. Saudi Arabia suddenly found itself withtons and tons of dollars, as did all Gulf States. The big question was what were theygoing to do with all that money? Stick it under the mattress? What we now know fromBritish Intelligence reports which were just released last year, is that British Intelligencereckoned that there was a strong possibility that the US was going to invade Saudi Arabiain 1973, in order to occupy the oil wells and bring the oil prices down. We know that ishow far planning went. We don’t know if this was just a contingency plan, or how seriousit was. Nobody knows; we likely won’t know for a long time. What we do know, is thatthe US Ambassador to Saudi Arabia went to the Saudis and raised the question of whatthey were going to do with their petrodollars. They negotiated an exclusive arrangement

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ISSN: 1911-4788with the Saudis that Saudi Arabia would recycle their petrodollars through the USinvestment banks. Whether the Saudis knew they were going to be invaded or not, orwhether they knew they were going to be bombed to the Stone Age, I don’t know. But,we do know that the Saudis agreed to take all of those petrodollars, give them to the NewYork investment banks, which gave them a tremendously privileged position, in terms ofglobal finance. It assured that New York City became the financial capital of the world.And we often think that New York City is the financial capital because it seems natural.Well it’s not natural; it’s partly US military power that assured it. So, the New Yorkinvestment bankers had the money, they had the business. They were going to have lotsof employment in financial services in New York City. Manufacturing in the city didn’tmatter. They had to remake the city around financial services and all the things that comewith it. So at that time, the investment bankers and the corporations got together, aroundthe idea of reviving the economy of New York City. They set up something called theDowntown Business Partnership. That partnership decided that they are going to sellNew York City as a destination for anyone interested in culture; they really pushed thecultural institutions like the Museum of Modern Art, Broadway, and other institutions asa destination for consumption, as tourist destinations. This is the moment that they cameup with the logo, which you have all seen, “I Love New York.” They were going to sellthe city; this is how they were going to revitalize it. But how could they do that at a timewhen nobody was picking up the garbage? Why would tourists come to the city whenthere was garbage on the streets? So, they had to start to actually deal, hands on, withhow city government was working, in the process they came across serious resistance.The police and fire unions were outraged that their wages were being diminished, theircontracts were being revoked, and a lot of them were being laid off. So they launched acampaign against the “I Love New York” idea. They produced a pamphlet called “FearCity.” They went to Kennedy Airport and gave it to tourists. It said things like “Don’t goto the city, because if there is a fire in your hotel, you will have to jump out the windowbecause there are no fire people to get you out,” “don’t walk in the city,” “you can onlyuse the buses between 9 o’clock in the morning and 5 in the afternoon,” and “never go onthe subway because you’re going to get mugged.” So they launched this “Fear City”campaign that actually got back to Europe and European travellers were kind of saying “Idon’t think I can go to New York.” This was the time when other things were going onlike the Summer of Sam, grisly murders, and things like that. Clearly the DowntownBusiness Partnership had an image problem. So it negotiated with the police and fireunions and said “Call off this campaign and we’ll re-hire a bunch of you.” So they said“OK” and called off the campaign and a bunch of them were rehired. But they wereassigned to work in Manhattan. So the Bronx burned down, a lot of the Queens garbagewas never picked up, and a lot of crime was going on all over the place. But they sealedoff Manhattan and made it a privileged place. Manhattan was as safe as they couldpossibly make it. It wasn’t very safe in the 1980s, it was really pretty rough, but bit by bitthere was a reoccupation of Manhattan. So this was the second principle: the municipal government was no longer aboutbenefiting the population, the municipal government had to address creating a goodbusiness climate. That was the goal, create a good business climate. And if there is aconflict between creating a good business climate and the well being of this or that

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ISSN: 1911-4788segment of the population, then to hell with this or that segment of the population. NewYork City became a divided city in the 1980s; an incredible crime wave took over. If youare going to privatize everything, why not privatize redistribution through criminalactivity. That, in effect, is what began to happen. The only problem was, given the way inwhich the defences were being set up, that it became increasingly difficult to privatize thevery rich. They could only do it with poor people, or middle class people. The otherproblem was, of course, that the other New York, the one that was not being privileged,had a crack epidemic, an AIDS epidemic and a public health crisis. So half of the citywas suffering miserably, while the other half was being steadily built up by businesspartnerships and a privileged notion of “this is a Manhattan we know and love.” Now we come to an end point of that, right now in the Bloomberg Administration.Here is a man who is a billionaire, who’s basically bought his way into the Mayoralty,and actually he is not a bad mayor. He’s not as bad as some of the mayors who have beenaround and he really is concerned about trying to make New York City competitive in theglobal economy. But, competitive for what? One of the first things Michael Bloombergdid was say “We’re not going to offer any subsidies to corporations to come here.” Hewent on record as saying, “If a corporation needs a subsidy to locate, in this high cost,high quality, wonderful location of New York City, if they need a subsidy to come here,then we don’t want them. We only want corporations that can afford to be here.” Hedidn’t say that about people, but, in fact, that policy carries over to people. There is anout migration from New York City of low income people, particularly Hispanics. They’removing to small towns in Pennsylvania and upper New York State because they can’tafford to live in New York City anymore. Conditions of life for them in New York Cityare appalling. Meanwhile, the conditions of life for the very, very rich are absolutelywonderful. This is the kind of city I now live in. On the one hand, you can appreciateliving in an environment like Manhattan, which is relatively safe now, where services arenot bad at all. You can appreciate that, but the trouble is that for middle class people suchas myself it is becoming impossible to live in Manhattan anymore, and part of that has todo with the trajectory that neoliberalization has taken. I mentioned investment bankers getting all this money from Saudi Arabia, thequestion is, what were they going to do with it? The US economy was depressed, wherewere they going to lend the money? They couldn’t put it into new buildings inManhattan; there were too many buildings around anyway. There was a real problem ofsurplus capital in 1975. Where on Earth they were going to put this surplus money?Walter Wriston, one of the investment bankers, said “its simple, we lend to countries,because countries don’t go away, we can always find them.” So they started lendingmassive amounts of money to places like Mexico, Brazil, Argentina, even Poland. Theylent on relatively low interest rates because interest rates were very low in the 70s. ThenPaul Volcker suddenly raised all the interest rates because of the higher rate of inflationin 1979. When the interest rate rose, suddenly Mexico had to pay back at a higher rate ofinterest and they couldn’t pay. So Mexico went bankrupt in 1982. The right wing neoliberals don’t like the IMF. In the first year of the ReaganAdministration, James Baker drew up a plan to effectively abolish the IMF and theReagan Administration was going to do it. Except that Mexico went bankrupt. There wasa real problem, if you let Mexico go bankrupt, then whose loans are going to be hit,Citibank, Chase Manhattan, all the New York banks were really going to be seriously hit

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ISSN: 1911-4788by the bankruptcy of Mexico. So it was at this point that they decided that they weregoing to rescue Mexico. They had to rescue Mexico. Well, the US Treasury stepped inand at that point James Baker suddenly said, “Ah this is where the IMF can help and theycan do the dirty work for us.” The trouble was that at that time the IMF was constitutedby Keynesian thinking people. So the first thing Baker said was, “let’s appoint someonewho is a true blue monetarist neoliberal and put them in there.” So they had what JosephStiglitz calls a “purge of all the Keynesians out of the IMF and World Bank in 1982.”They brought in all these other economists who were thinking in terms of monetarismand neoliberal principles. Then they said “let’s do the Mexico thing.” What the IMFstarted to do was to engage in this process by saying “The way to get the money backfrom the Mexicans is to put the squeeze on the Mexican people. Again, it is that principlewhich was established in New York City that if there is conflict between the financialinstitutions and the well-being of the people, hit the well-being of the people of Mexico,hit the well-being of the people of Brazil, hit the well-being of those in Ecuador, hit thewell being of wherever it is. Structural adjustment does exactly that. At the same time italso insists on institutional reform, “get rid of strong unions, introduce flexibility into thelabour market, and reform your pension structures,” so that structural adjustmentbecomes the name of the game. This is the way in which the IMF started to work globallyand the New York investment banks, at the centre of that, have, of course, becomeincredibly affluent. What’s more, they have become engaged in the process offinancialization on a global scale. New instruments, some of them quite astonishing, have begun to emerge. Hedgefunds for example, there were about 300 of them 15 years ago, now there are somethinglike 3000 of them. We’ve seen recently one of them going belly up and things like thatbut, still, the leading hedge fund managers last year personally took 250 million dollarseach. That is, they each had a personal income of 250 million dollars in one year. Now Iknow you are all going to have ambitions of becoming hedge fund managers, but watchout, watch out. That’s not uncommon in the financial services industry. In Manhattan wehave lots of people like that living in the place, a privileged centre, for a trans-nationalcapitalist class, if you want to call it that—I don’t like that term though—to enjoy itself,to manipulate monies which are fictitious. This last weekend in the New York Timesthere was some data on some interesting aggregates that are coming out recently. Thereare things called interest rate and currency derivatives. We can talk about what they are,and if you know what they are fine, and if not what you need to know is that in 1988,these were zero. Now they are 250.8 trillion dollars. There is something called “creditdefault swaps” and the volume of them outstanding stood at zero in the year 2000 andnow its 26.0 trillion dollars. Equity derivatives outstanding in 2002 were about 2 trilliondollars, now there about 6.4 trillion. The article comments that the total of all theseoutstanding swaps and derivatives at the end of June was 283.2 trillion dollars. Thecombined gross domestic product of the United States, the European Union, Canada,Japan, and China is 34 trillion dollars. These people are making masses and masses ofmoney out of playing these games, these fictitious games and it’s all over the city. Thecity of New York is now dominated by that kind of wealth which is generated out of thiskind of activity. Of course a lot of that wealth trickles down, not to people like me, but ittrickles down to financial services in general; it trickles down to the legal services, taxavoidance. I know someone who just retired who is getting 400,000 dollars a year,

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ISSN: 1911-4788working part time. What does he do? He advised people how to play the tax game,internationally. This is, of course, what neoliberalization has been about. When you lookat the aggregate data, and it’s absolutely astonishing, the top one percent of the USpopulation has doubled its share of the national income over the last twenty years. Thishas happened in Britain too, and other places where neoliberalization has taken hold. Thetop 0.1 percent has quadrupled its share of the national income over the last twenty years.But when you go to the top 0.01 percent, they have increased their income by 497 percentover the last twenty years. All you have to do is start looking at this data and you willrealize there is an incredible concentration of wealth occurring in any country that goesneoliberal, part neoliberal, or major neoliberal. China, right now, has gone a peculiar kindof neoliberal. The amount of wealth that is being concentrated in a few hands in China isabsolutely astonishing also. What this leads to is the general idea that neoliberalization, from its veryinception, was about the restoration of class power and, in particular, the restoration ofclass power to a very privileged elite, i.e. the investment bankers and top corporatechiefs. The data show that again and again and again. At this point you have to say thatthis was a conscious policy, this was not an accident. It is kind of funny, you read allthese accounts of people like Stiglitz in the 90s, and he said, “well we did this policy andthat policy and it’s interesting that the rich got richer and poor got poorer by accident, butthat was just a by-product of what was happening.” No, that’s what these policies weredesigned to do all along, that’s exactly what they were doing in New York City. SinceMexico went really neoliberal after the IMF had done several rounds of going after it, theWorld Bank also, it went really neoliberal between 1988 and 1992. Five years later, thereare something like 20 Mexicans on the World's Wealthiest List. I believe that the third orfourth richest man in the world is a man called Carlos Slim, who is Mexican. Mexico hasmore billionaires than Saudi Arabia. For those of you who have been to Mexico, haveyou noticed that there is poverty there? Have you noticed there is a lot of unemploymentthere? Have you noticed there is a lot of misery there? A lot of ill health and no publicservices, the water is dirty. This is what neoliberalization is all about and what it does tocities is really fascinating. In the New York case, neoliberalization was followed by anenormous crime wave and ill health wave, which was followed by the Giulianirepressions. Actually if you look at all Latin American cities in the neoliberal period, allof them have had an increase in the absolute level of poverty, except Santiago. All ofthem, including Santiago, have had an incredible increase in social inequality. The resultof that is that we now have divided cities; gated communities here, impoverishedcommunities there. The city is being dissolved into micro-states of rich and poor. Wehave that in New York City, with Manhattan vs. the Boroughs still. The other thing thedata show about Latin American urbanization is an enormous crime wave that has rackedthe cities to the point where criminal gangs have taken over the streets of Sao Pauloperiodically over the last few months and shown that they can run the city. You findcriminal activity, armed robberies. I go to Argentina regularly because my wife is fromArgentina. Last Christmas we had the pleasure of lying on the floor face down, gunspointed at us, while they took everything. And this is normal, this is not abnormal, this isnormal. This is the privatization of redistribution of income; I think you have tounderstand it that way.

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ISSN: 1911-4788 So the big concern is, through the evolution of these cities look at what’s goingon. There is literature now like Mike Davis' Planet of Slums, and we are talking aboutthat. We have to get a grasp of the process, where it’s coming from, who’s doing it andwhat’s doing it. In order to get a grasp, we have to come back to some simple strategies.If it looks like class struggle, feels like class struggle, then it is class struggle for God’ssake! And the only way you’re going to deal with it is to fight back in class struggleterms. But, I’m told by my academic friends that class is no longer a valid category. I’mtold by others of old, that it’s disruptive. If you talk about class, you “rock the boat.” TheWall Street Journal sneers at anybody who talks about this redistribution and says “Ohthey want to launch a divisive class struggle,” as if we are all together in the same boat.We are not all together in the same boat. I am not in the same boat as those that takehome 250 million dollars in a year. So this, it seems to me, is where we’re at. In order todo something about it I think we have to recognize that cities have always been centres ofconflict, change and transformation. There are, actually, movements at work in differentcities trying to change things. You can look at stuff that is going in various Braziliancities and what’s going on in some European cities. Cities can be crucibles where newpolitics can be constructed and emerge. The biggest difficulty right now is that cities arebeing divided into microstates. So that even now I’m told that “the city” is not a validconcept either. My answer to that is we have to regain some notion of the city, in the waythat Park is talking about, as some kind of body politic through which we can reconstruct,not only cities, but can reconstruct human relations and ourselves. We have to think aboutit in those terms, and we have to understand that this is a political project, a class project.Otherwise we will simply go through the next round of restructuring and find ourselvespassively agreeing to what is going on. It is with that idea that I’d like to leave you andhope that this will be one of the big themes that you will take up in your new journal.